Managing with Dual Strategies

Rarely, if ever, do companies clearly distinguish between or balance the management of today's business and planning for the future. Derek Abell, internationally renowned for his pioneering work on strategic market planning, once again breaks sharply with conventional wisdom to demonstrate how a company can develop analytic marketing modes for not one but two distinct planning horizons. Managing with dual strategies, Abell argues, calls for new approaches not only to planning, but to organizational structure and management control. He makes specific recommendations on how current operating practices need to be adapted, and shows how leading firms are recognizing the dual nature of management as a new way of organizational life.

Planning for the present, Abell shows, requires a vision of how the firm must operate now given its unique competencies and resources. By involving each level within the management team from the CEO to financial planners, to line managers, Abell details how firms can pinpoint market opportunities through careful segmentation and identification of key success factors to "connect" with customers. At the same time, he distinguishes the importance of horizontal relationships for defining and focusing on internal strategies, and vertical relationships for being attuned to changing market realities.

Success today, he warns, does not ensure success tomorrow. Abell describes how world-class leaders such as Nestlé, Caterpillar, and Heineken monitor both internal and external forces for market change, successfully mastering the present, and preempting the future. Preparing for the future requires understanding the full range of activities industry-wide, and anticipating changes in technology, buyer/seller behavior, and product life cycles. Abell explains how companies can develop and implement these co-existing visions and address the real forms of change that vitally affect their future -- today and tomorrow.

Using present capacities to their fullest advantage and developing new ones in anticipation of the future characterizes the high performer in all fields of human endeavor. Athletes train and compete, and train further to enhance capacities for future events. Armies fight battles deploying whatever materiel and personnel they have at their disposal, and in more peaceful times develop new military capabilities in anticipation of battles still unfought. More generally speaking, we "consume" and "invest"; and as the old proverb warns (to remind us that there is a downside also): "We make our bed and lie in it."

Management as a human endeavor differs from the above examples in one important respect: Running the business and changing it are not sequential but parallel pursuits. Even armies are seldom on full alert all the time, at least not for limitless periods. War and peace are punctuated -- providing the breathing space to build and regroup. Managers enjoy no such luxury, competing today and preparing for tomorrow with no letup on either front.

Because the two activities go on continuously and in parallel, we tend to forget that they are in fact very different in character. Running a successful business requires a clear strategy in terms of defining target markets and lavishing attention on those factors which are critical to success; changing a business in anticipation of the future requires a vision of how the future will look and a strategy for how the organization will have to adapt to meet future challenges.

Until recently, most organizations have successfully managed to run and change their businesses under the umbrella of a single strategy. As long as neither present competition was too demanding, nor change too severe, this approach proved to be quite adequate. This did, in fact, characterize most business activity in the long period of expansion following the Second World War and lasting until the early 1970s. In spite of a few nasty jolts in which management was rudely reminded of the necessity for change, and in spite of a few outbursts of intense competitive activity when supply and demand were temporarily out of balance, or a competitor made a radical breakthrough, a "business as usual" philosophy prevailed. Singular strategies encompassing present and future did the job. Not so today. As competition for current markets has heated up and as change has become increasingly pervasive, a single strategy encompassing the near to medium term runs the risk of providing neither the basis for effectively running the existing business, nor the basis for managing change.

The idea of duality is not entirely new. In 1968, a far-sighted publication of the Boston Consulting Group revealed that the planning practices of a sample of their large client companies were of two distinct types: "Action planning" was used to plan the necessary present and future actions to ensure "operational" success; while "planning for strategic change" was used to improve the organization's capability to have current major decisions "properly weighted by in-depth study of long-term environmental change." In many cases, this was found to mean changing traditional assumptions and policies in order to facilitate the organizations' adaptation to future conditions.

Curiously, this distinction, articulated nearly twenty-five years ago, has not been given a great deal of further attention. One reason may indeed be that times were less demanding and the need to distinguish between present and future strategies was less evident; another may be that it was an insight ahead of its time; strategic planning was then in a very experimental stage and innovative approaches and insights -- good and bad -- were used and discarded with some rapidity.

Whatever the reasons, most companies have continued to develop strategic planning practices without discriminating clearly between the two modes -- often in fact, adopting systems and approaches which are a "halfway house" between the two, and which meet neither today's short-term needs for excellence nor the long-term needs for change as well as they should. Critics of current planning approaches which are built primarily on "fitting" existing distinctive competences to market opportunities have, in fact, argued that articulating such strategies and making them explicit can actually limit flexibility, and "block out peripheral vision!" It is certainly true that an undue focus on the present at the expense of the future can have this very undesirable result. But there is nothing wrong at all with making present strategy explicit if this is combined with a parallel undertaking to determine the direction of future change.

The fact is that companies' options to perform with excellence today are highly dependent on decisions made in the past; and decisions to pursue this or that future direction today inevitably shape future options. As the old proverb has it: "In the present lies the past, and in what is now is hidden what will be." One executive, articulating the same idea in managerial terms, put it as follows: "Short-term success is mainly a feature of long-term moves made earlier."

The distinction between a present and future orientation is not the usual short-term, long-term distinction -- in which the short-term plan is simply a detailed budgeting exercise made in the context of a hoped-for long-term market position. Present planning also requires vision -- a vision of how the firm has to operate now given its unique competences and choice of target markets. The long-term plan, by contrast, is built on a vision of the future -- and even more importantly on how to get there.

Planning for today requires a clear definition of the business -- a precise delineation of target customer segments, customer functions, and the business approach to be used; planning for tomorrow is much more concerned with how the business should be redefined for the future.

Planning for today is focused on shaping up the business to meet the needs of customers today with excellence. This means identifying those factors that are critical to success and smothering them with attention; planning for tomorrow is often focused on reshaping the business to compete more effectively in the future.

Planning for today is focused on achieving compliance in the various functional activities of the firm with whatever definition of the business has been chosen; planning for tomorrow is much more likely to involve bold moves away from existing ways of conducting the business.

In a nutshell, planning for today is about managing for results; planning for tomorrow is about managing change.

I have deliberately used the word managing here together with the words strategy and planning because the present/future dichotomy goes into all aspects of managerial work. What we are in fact talking about in this and ensuing chapters are two parallel managerial agendas -- one aimed at managing today's activities with excellence, the other aimed at preparing for the future.

Few firms have clear "20/20" vision when it comes to discriminating adequately between these two types of plan. All of the usual human ailments with respect to vision are reproduced in companies. Myopia can extend well beyond the "marketing myopia," that Theodore Levitt identified three decades ago. Companies can, in fact, be so consumed with the present that they fail completely to prepare themselves for the future. When change comes, it is unexpected and unprepared for -- and these companies are left high and dry, the victims of their short-term focus. But just as dangerous is to focus most of the attention on the future, overlooking the needs for excellent performance today. Change should be a management preoccupation, but in addition to, not instead of, present performance.

As we shall see subsequently, the appropriate balance between a present and future orientation is related to the situation at hand. In some circumstances, particularly those characterized by rapid or extreme change, the future component must be given the lion's share of attention; in more stable circumstances, the present component is predominant. But whatever the situation, both components must always be attended to in parallel.

Underlying the failure of companies to achieve the proper balance between present and future is usually the inability of individual managers to wear these two hats simultaneously. Some managers, especially at lower levels, do of course spend most of their time on current operations as opposed to the requirements for future change. And the reverse is true at the top of the corporate hierarchy. But the more organizations flatten and responsibilities are pushed down, the more every manager has to have a sharp eye on both horizons. In fact, it is a critical requirement to develop 20/20 vision up or down the whole organization if the present and future are to be well managed.

Different companies are adjusting their practices in different ways in recognition of the dual nature of managerial work. While some continue with a "catchall" process which lumps together present and future into a two-, three-, or five-year business plan, others are making a clearer distinction between the long-term framework and shorter-term plans, reserving the former more for corporate headquarters while delegating the latter more to business unit management. Only a few are making a more fundamental distinction between present and future, and between the roles of corporate and business unit management in attending to each. It is to current managerial practice that we now turn to see how some leading companies are responding to the dual challenge of present and future in increasingly competitive and changing markets.

C. Roland Christensen Robert Walmsley University Professor, Emeritus, Harvard University Must reading for business educators, senior managers, and corporate directors. Derek Abell presents a new and pragmatic approach to a perennial management dilemma -- how to implement one's current organizational strategy while simultaneously managing the emergence of a new strategy to meet future competitive needs.

Gerard Van Shaik former Chairman of the Executive Board of Heineken N.V., the Netherlands Derek Abell's lucid analyses and pragmatic suggestions will tempt the reader to have a close look at his own management approach and reconsider its relevance for the future of his business. This book is must reading.

Brad Gale co-author of The PIMS Principles: Linking Strategy to Performance Connecting with customers today and preempting the markets of the future are truly the dual challenges that operating executives face. In Managing with Dual Strategies, Derek Abell provides a refreshing new perspective for simultaneously achieving current performance and driving change that will capture the future.